Need a realtor to sell a home in this market?

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glennds
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Re: Need a realtor to sell a home in this market?

Post by glennds » Wed Apr 14, 2021 10:22 pm

tomfoolery wrote:
Wed Apr 14, 2021 9:59 pm
glennds wrote:
Wed Apr 14, 2021 7:37 pm


This is why I thought it was absurd to find a conspiracy theory in any of it. Crunching the numbers, it's a pure business opportunity due to the spread between rent and home prices at a given investment cap rate. This is why institutional money is pouring in, and unless rent drops, home values will escalate to a value based not just on comps, but on an investment value driven by implied rate x cap rate. And if interest rates drop into negative territory, this will go wild.
Here's where my conspiracy theory comes into play.

And I know this is going to sound really absurd and impossible, but play along.

What if Blackrock has agents that somehow can have secret meetings with high ranking US Government officials. I know, ridiculous, but let's say it could happen.

And Blackrock said, "you know it would be a fantastic opportunity for us to buy up more single family homes, if interest rates could come down a bit on mortgage-backed securities so we can buy properties with cash, close in 14 days, and then equity strip with a mortgage. Any chance you can get the Fed to buy a ton of Mortgage Backed Securities to drive the rates down?"

And this hypothetical politician/power broker laughed and said, yeah, "We'll say that the Fed needs to buy $20B of mortgage backed securities every month, indefinitely, to keep the housing market solvent, and even when the housing market has gone up 30%, we'll keep doing it HAHAH"
I'm not seeing where mortgage backed securities or mortgages come into play. The investment here is hedge funds buying cash flow producing assets in the form of single family homes as investment property with private capital, and doing so on a large aggregate scale. Nobody is getting a conventional mortgage either on the front end or as a take-out because the property is not owner occupied. The model is effectively a conversion of residential property into institutionally owned investment property.

Besides, Blackrock is only one (big) player among an increasingly crowded field that now includes foreign insurance companies like Allianz and sovereign wealth funds. Even if your conspiracy theory was sensical on the funding model level, it would be a real stretch for a whole crowd of institutions even offshore, to be in on it.

Don't get me wrong though. I'm not necessarily saying this is good. If the single family home market, beyond a few opportunistic markets, is in the process of being institutionalized, it has huge implications depending on how far it goes. Even if the parties doing it are just private concerns practicing good old fashioned capitalism.

Then again if you're a Libertarian, this is just the free market doing it's thing, so live by the sword, die by the sword. Then again, you're a long time registered Democrat, so that last part you can save for your Libertarian friend that you're always trying to talk sense into.
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Re: Need a realtor to sell a home in this market?

Post by tomfoolery » Wed Apr 14, 2021 11:01 pm

glennds wrote:
Wed Apr 14, 2021 10:22 pm

I'm not seeing where mortgage backed securities or mortgages come into play. The investment here is hedge funds buying cash flow producing assets in the form of single family homes as investment property with private capital, and doing so on a large aggregate scale. Nobody is getting a conventional mortgage either on the front end or as a take-out because the property is not owner occupied. The model is effectively a conversion of residential property into institutionally owned investment property.
So you don't think the Fed's behavior creates a greater market for Blackrock et al to securitize their property mortgages and sell them? While they may not be owner-occupied, there seems to be some fungibility to it.

Such that if the Fed's behavior causes related assets, such as owner-occupied mortgages to have lower rates, then Blackrock's Investment Property Mortgages should come down as well.

Imagine an environment where owner-occupied is a 4% rate. Blackrock would maybe have to sell their mortgages at a 5% rate, since investment property is riskier.

But if Fed manipulates rates down to 2.5%, then Blackrock should be able to sell their non-owner occupied for 3.5% because investors are hurting for yield and willing to assume riskier assets to get that yield.

The Fed's behavior incentivizes riskier investment yield-seeking behaviors. Also, there's no opportunity for price discovery because if the mortgage rate is 2.5%, screw it, let the entry-level home in Las Vegas where there's 30% unemployment and median income is $35k shoot up to $500k for an entry level shack because the monthly payment is so low.

If there was free market price discovery, mortgages might be a 10% or 15% rate right now due to how large of a bubble the market is in. All else equal, without Fannie and Freddie to backstop a mortgage, what rate of interest would you require if I wanted to buy a single family 1400 sq 3/2 home in Las Vegas, in a crap neighborhood, that was built in 1972 for $500k with $20k downpayment.

Would you lend me $480k to buy this craphole shack at 3% interest? I promise I'll pay you back, and if I dont, you get to keep the house! Doesn't that sound like a steal?

Absent government manipulation of backstopping absurdly appraised mortgages and the Fed forcing rates down, I would only lend this person $480k if the interest rate were around 50% or greater.

So in an actual free market, price discovery would occur and the seller of this Vegas Craptacular Shack would have to drop their price to $150k to find a buyer who can find an investor who is willing to lend them the money to buy the house at a reasonable rate. I would only charge maybe 8% interest to lend this person $150k to buy the same house. But at $480k, I need 50% interest rate because if you default, I don't think I can sell the house for anywhere near 480k and will lose a ton of money.

One of the main benefits of the free market is price discovery.
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Re: Need a realtor to sell a home in this market?

Post by D1984 » Thu Apr 15, 2021 12:33 am

tomfoolery wrote:
Wed Apr 14, 2021 11:01 pm
glennds wrote:
Wed Apr 14, 2021 10:22 pm

I'm not seeing where mortgage backed securities or mortgages come into play. The investment here is hedge funds buying cash flow producing assets in the form of single family homes as investment property with private capital, and doing so on a large aggregate scale. Nobody is getting a conventional mortgage either on the front end or as a take-out because the property is not owner occupied. The model is effectively a conversion of residential property into institutionally owned investment property.
So you don't think the Fed's behavior creates a greater market for Blackrock et al to securitize their property mortgages and sell them? While they may not be owner-occupied, there seems to be some fungibility to it.

Such that if the Fed's behavior causes related assets, such as owner-occupied mortgages to have lower rates, then Blackrock's Investment Property Mortgages should come down as well.

Imagine an environment where owner-occupied is a 4% rate. Blackrock would maybe have to sell their mortgages at a 5% rate, since investment property is riskier.

But if Fed manipulates rates down to 2.5%, then Blackrock should be able to sell their non-owner occupied for 3.5% because investors are hurting for yield and willing to assume riskier assets to get that yield.

The Fed's behavior incentivizes riskier investment yield-seeking behaviors. Also, there's no opportunity for price discovery because if the mortgage rate is 2.5%, screw it, let the entry-level home in Las Vegas where there's 30% unemployment and median income is $35k shoot up to $500k for an entry level shack because the monthly payment is so low.

If there was free market price discovery, mortgages might be a 10% or 15% rate right now due to how large of a bubble the market is in. All else equal, without Fannie and Freddie to backstop a mortgage, what rate of interest would you require if I wanted to buy a single family 1400 sq 3/2 home in Las Vegas, in a crap neighborhood, that was built in 1972 for $500k with $20k downpayment.

Would you lend me $480k to buy this craphole shack at 3% interest? I promise I'll pay you back, and if I dont, you get to keep the house! Doesn't that sound like a steal?

Absent government manipulation of backstopping absurdly appraised mortgages and the Fed forcing rates down, I would only lend this person $480k if the interest rate were around 50% or greater.

So in an actual free market, price discovery would occur and the seller of this Vegas Craptacular Shack would have to drop their price to $150k to find a buyer who can find an investor who is willing to lend them the money to buy the house at a reasonable rate. I would only charge maybe 8% interest to lend this person $150k to buy the same house. But at $480k, I need 50% interest rate because if you default, I don't think I can sell the house for anywhere near 480k and will lose a ton of money.

One of the main benefits of the free market is price discovery.
Unemployment in Las Vegas is (as of Mar 2021) is 9.3%. It is nowhere near 30% It was around 28% or 29% IIRC back in April 2020 but you are almost a year out of date if you think it's anywhere close to 30% now.

Also, if Fannie/Freddie/FHA backing up mortgages causes sky-high appreciation beyond what economic fundamentals justify, then why is this only occurring now? We've had Fannie Mae since what....the late 1930s? FHA (and its predecessor HOLC) since 1934 or 1935, government-backed VA loans since 1944, and Freddie Mac since 1971. Explicitly-government backed (backed under Federal Law by the full faith and credit of the US government) mortgage-backed securities were first authorized by Federal law in 1968 and were common by the early 1970s.....and CMOs have been around since the very early 80s.

If you wish to say that Federal backing of mortgages combined with "too low" of rates causes bubbly prices, then why did it not cause bubbly prices in the mid-40s to early 50s (when we had sharply negative real rates--sometimes close to negative 7 or 8% after inflation) when we had high inflation first in the immediate post-WWII period and then again from mid-1950 to 1951 during the Korean War? Or for that matter, why did it not cause bubbles during the 1970s when real rates were negative or almost negative for several years until Volcker came along?

Finally, why do you think investors would only be willing to lend money at a rate as high as 8% for a mortgage against a reasonably priced (i.e. reasonably priced by a price-to-income and/or price-to-rent ratio) home? Even if we get 3% inflation on a sustained basis (which is not at all assured) then that represents a "real" return of 5%; if inflation over the short to medium term term averages only 2.5% then that represents a real return of 5.5%. Historically (at least over the last hundred years or so) mortgage rates have almost never been anywhere close to 5% or 5.5% real (or higher than that) except for a brief blip in the 1980s and a few years in the 90s after investors were so shell-shocked from the inflation of 1973-1981 that they demanded high rates to compensate. Given that expected inflation is nowhere near 8%, nominal GDP growth and population growth are lower than in the 1950-75 period, productivity growth is also lower than during this period (and indeed lower than it was from circa 1995-2004 as well) and thus investment and consumption demand on loanable funds is also commensurately low, why should investors have any right to expect 5% or 5.5% real or so on a reasonably safe asset? Where is the booming demand for capital that would bid rates up that high?
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Re: Need a realtor to sell a home in this market?

Post by boglerdude » Thu Apr 15, 2021 3:17 am

"QE doesnt do anything"
"IOER doesnt do anything"

Well, they should just shut off the spigot then. Or shift it to my mouth...
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Re: Need a realtor to sell a home in this market?

Post by pugchief » Thu Apr 15, 2021 11:14 am

Tom, if you really believed all that, you would have bought not one, but 2 or more houses by now. They can only go up in price, so it's a no-brainer investment; sell all your PP assets and put them into single family homes.

So either you don't really believe that, or .....
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Re: Need a realtor to sell a home in this market?

Post by tomfoolery » Thu Apr 15, 2021 12:17 pm

pugchief wrote:
Thu Apr 15, 2021 11:14 am
Tom, if you really believed all that, you would have bought not one, but 2 or more houses by now. They can only go up in price, so it's a no-brainer investment; sell all your PP assets and put them into single family homes.

So either you don't really believe that, or .....
The problem is transaction costs to buy/sell/lease/leverage. I am not willing to pay those costs.

I don't want to open up my financial records and beg a bank to give me a mortgage as a self-employed person. Also required if I pay in cash in full and then equity strip.

More than half of my money is in retirement accounts and there's a large cost associated with self-directed accounts that can directly invest in real estate.

There's geographic risk associated with buying one or two properties versus buying 5,000 properties in various regions.

There's a huge cost associated with leasing a single property whereas there's great economies of scale if leasing 5,000 of them. You can have one person who only handles background checks of prospective tenants, you don't have to spend a week researching eviction law and interviewing lawyers if the need arises because you have a general council on staff to handle that, etc.

If I had a time machine, I'd go back in time to 10 years ago, not been self-employed, had a W2 job, and "house hacked" where you buy a house on a primary mortgage, live in it for a year, rent it out, buy a new house on a new primary mortgage, repeat. I've heard you can do this about 7 times before you hit the max amount you're allowed to have.

All backstopped by Fannie and Freddie and the Fed has generously reduced interest rates so you can keep refinancing every few years.

I haven't done the exact math, but if I had done this back in 2011 for a 7 year period (hitting my 7 allowable mortgages), I'd have been far better off making $40k a year as a W2 secretary than making $200k a year as a self-employed consultant for the last decade.

My net worth would likely be triple what it is now. But I was an idiot who thought pulling himself up by his bootstraps and making a decent 6-figure living being self-employed (but effectively making mortgage lending be impossible) was the way to go. I was fighting the government, and I was wrong.
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Re: Need a realtor to sell a home in this market?

Post by tomfoolery » Thu Apr 15, 2021 12:21 pm

D1984 wrote:
Thu Apr 15, 2021 12:33 am

Unemployment in Las Vegas is (as of Mar 2021) is 9.3%. It is nowhere near 30% It was around 28% or 29% IIRC back in April 2020 but you are almost a year out of date if you think it's anywhere close to 30% now.
You're correct. The official U3 numbers are around 9% for Vegas. And the official CPI-U is hovering around 2%.

I don't know why I thought unemployment is 30% and Inflation is 15%. I think QAnon has gotten to my grocery store, landlord, health insurance company, gas station and gun store.
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Re: Need a realtor to sell a home in this market?

Post by Tortoise » Thu Apr 15, 2021 12:45 pm

tomfoolery wrote:
Thu Apr 15, 2021 12:21 pm
You're correct. The official U3 numbers are around 9% for Vegas. And the official CPI-U is hovering around 2%.

I don't know why I thought unemployment is 30% and Inflation is 15%. I think QAnon has gotten to my grocery store, landlord, health insurance company, gas station and gun store.
There are simple substitutions for all of those things.

Forage and grow your own food instead of shopping at a grocery store. Build your own house out of sticks and mud instead of renting from a landlord. Stay healthy so you never need health care. Walk instead of driving a vehicle. Carry a big stick instead of a gun.

If you make all of those simple substitutions, you reach the correct conclusion that inflation is quite low, which agrees with CPI-U.
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Re: Need a realtor to sell a home in this market?

Post by tomfoolery » Thu Apr 15, 2021 12:55 pm

Tortoise wrote:
Thu Apr 15, 2021 12:45 pm
tomfoolery wrote:
Thu Apr 15, 2021 12:21 pm
You're correct. The official U3 numbers are around 9% for Vegas. And the official CPI-U is hovering around 2%.

I don't know why I thought unemployment is 30% and Inflation is 15%. I think QAnon has gotten to my grocery store, landlord, health insurance company, gas station and gun store.
There are simple substitutions for all of those things.

Forage and grow your own food instead of shopping at a grocery store. Build your own house out of sticks and mud instead of renting from a landlord. Stay healthy so you never need health care. Walk instead of driving a vehicle. Carry a big stick instead of a gun.

If you make all of those simple substitutions, you reach the correct conclusion that inflation is quite low, which agrees with CPI-U.
Can you recommend something other than sticks for housing and self defense? Lumber is up another 20% month-over-month.
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Re: Need a realtor to sell a home in this market?

Post by Tortoise » Thu Apr 15, 2021 2:56 pm

tomfoolery wrote:
Thu Apr 15, 2021 12:55 pm
Can you recommend something other than sticks for housing and self defense? Lumber is up another 20% month-over-month.
I guess replace sticks with rocks?
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Re: Need a realtor to sell a home in this market?

Post by glennds » Thu Apr 15, 2021 5:08 pm

tomfoolery wrote:
Wed Apr 14, 2021 11:01 pm
glennds wrote:
Wed Apr 14, 2021 10:22 pm

I'm not seeing where mortgage backed securities or mortgages come into play. The investment here is hedge funds buying cash flow producing assets in the form of single family homes as investment property with private capital, and doing so on a large aggregate scale. Nobody is getting a conventional mortgage either on the front end or as a take-out because the property is not owner occupied. The model is effectively a conversion of residential property into institutionally owned investment property.
So you don't think the Fed's behavior creates a greater market for Blackrock et al to securitize their property mortgages and sell them? While they may not be owner-occupied, there seems to be some fungibility to it.

Such that if the Fed's behavior causes related assets, such as owner-occupied mortgages to have lower rates, then Blackrock's Investment Property Mortgages should come down as well.

Imagine an environment where owner-occupied is a 4% rate. Blackrock would maybe have to sell their mortgages at a 5% rate, since investment property is riskier.

But if Fed manipulates rates down to 2.5%, then Blackrock should be able to sell their non-owner occupied for 3.5% because investors are hurting for yield and willing to assume riskier assets to get that yield.

The Fed's behavior incentivizes riskier investment yield-seeking behaviors. Also, there's no opportunity for price discovery because if the mortgage rate is 2.5%, screw it, let the entry-level home in Las Vegas where there's 30% unemployment and median income is $35k shoot up to $500k for an entry level shack because the monthly payment is so low.
Tom,
I think there is still a bit of a disconnect here.
Let's say Blackrock, or any institutional fund for that matter, sets up a fund from their own capital or their own funding sources whatever they may be. And that fund goes out and acquires existing shopping centers. Now they are the landlord of these acquired properties. Then they contract with local management companies and real estate brokers to manage the tenanting, maintenance and property accounting of the shopping centers. Let's say they eventually assemble a portfolio of say 200 shopping centers.
Once they have this portfolio assembled, they can underwrite bonds based on the underlying rental cash flow coming in from the 200 properties. In that underwriting will be reserves and allowances for vacancy, lease turnover, defaults, re-tenanting costs, assumptions for rent escalations over time and let's not forget asset management fees to themselves. They will also make assumptions on the appreciation of the value of the underlying shopping centers themselves and figure that into a disposition unwind at the end of a chosen term for the investment. All this will shake out to a quality rating on the portfolio and a yield. They now have a fixed income security that they can go out and sell. Or not, maybe instead they'll hold the portfolio for themselves and simply collect the cash flow.

Now substitute shopping centers for apartment complexes. No problem. Happens every day.
Now substitute apartment complexes for single family homes, a lot of them. Now we're getting novel. See where I'm going?

Mortgages as you know them are not part of this scenario. No Fannie, no Freddie. It is basically a sophisticated commercial real estate financing model applied to single family homes. The brilliance in the model is that you can acquire the same rent stream for lower cost because single family homes are inexpensive in comparison to other rent generating forms of real estate at this time, at least in certain markets.
Surprising to you and I as individuals because we think homes are expensive and getting more so, but in the context of this financing model they are not.
So long as you consider a dollar of rent to be equivalent to a dollar of rent and you are agnostic to the product type it comes from, then you see how this evolved.

The secondary residential mortgage market is irrelevant (FNMA, FMCC). And the Fed's interest rate policy is of no special impact to this scenario, rather it is a universal condition affecting the yield market for all marketable investments.

The big question that I do not have an answer for is what implications this model has for the housing market at large. If the activity is limited to a few markets and for a limited time, then not much. But if Wall Street does what Wall Street likes to do, which is scale things up to the moon, then it could be impactful to the nationwide housing market, certainly from a supply standpoint.

If you're interested enough, head over to the St. Louis Fed FRED site and look at the Case-Shiller graphs for certain markets like PHX, Las Vegas, and the 20 City Metro composite. It's stunning how steep the escalations are.
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Re: Need a realtor to sell a home in this market?

Post by glennds » Thu Apr 15, 2021 5:16 pm

20 city composite Case-Shiller index

What's your interpretation of what it says and why? Anyone?
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Re: Need a realtor to sell a home in this market?

Post by D1984 » Thu Apr 15, 2021 8:41 pm

tomfoolery wrote:
Thu Apr 15, 2021 12:21 pm
D1984 wrote:
Thu Apr 15, 2021 12:33 am

Unemployment in Las Vegas is (as of Mar 2021) is 9.3%. It is nowhere near 30% It was around 28% or 29% IIRC back in April 2020 but you are almost a year out of date if you think it's anywhere close to 30% now.
You're correct. The official U3 numbers are around 9% for Vegas. And the official CPI-U is hovering around 2%.

I don't know why I thought unemployment is 30% and Inflation is 15%. I think QAnon has gotten to my grocery store, landlord, health insurance company, gas station and gun store.
If you want to state that your personal CPI is higher than 2 or 3% then that's a fair assertion (although IIRC you live in California.....and one of the reasons the cost of living is so high--and rising--there is the lack of housing supply and this reflects in both housing prices and rents; the Fed didn't really have anything directly to do with that....Yellen or Powell can't just order California to build a few million more homes); although my own "personal" CPI for my cost of living is nowhere near 15% I am not in your shoes so I can't judge your situation. If, on the other hand, you want to start pulling out stuff from Chapwood or (God forbid) Shadowstats to "prove" how inflation is really in the low double digits then I'm not even having this discussion with you seeing as how both have been thoroughly debunked plenty of times online and all you need to do is use Google to find said debunkings.
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Re: Need a realtor to sell a home in this market?

Post by D1984 » Thu Apr 15, 2021 9:32 pm

tomfoolery wrote:
Thu Apr 15, 2021 12:55 pm
Tortoise wrote:
Thu Apr 15, 2021 12:45 pm
tomfoolery wrote:
Thu Apr 15, 2021 12:21 pm
You're correct. The official U3 numbers are around 9% for Vegas. And the official CPI-U is hovering around 2%.

I don't know why I thought unemployment is 30% and Inflation is 15%. I think QAnon has gotten to my grocery store, landlord, health insurance company, gas station and gun store.
There are simple substitutions for all of those things.

Forage and grow your own food instead of shopping at a grocery store. Build your own house out of sticks and mud instead of renting from a landlord. Stay healthy so you never need health care. Walk instead of driving a vehicle. Carry a big stick instead of a gun.

If you make all of those simple substitutions, you reach the correct conclusion that inflation is quite low, which agrees with CPI-U.
Can you recommend something other than sticks for housing and self defense? Lumber is up another 20% month-over-month.


https://fred.stlouisfed.org/series/WPU081

Producer Price Index by Commodity: Lumber and Wood Products: Lumber



https://fred.stlouisfed.org/series/WPU083

Producer Price Index by Commodity: Lumber and Wood Products: Plywood


Did I really need to pull out data from the Federal Reserve (or if you don't trust them, then from the private free-market company Random Lengths Publishing/RISI which maintains various lumber price composites going back to the early 1980s) simply to show that:

A. Lumber price spikes are nothing new (you should see the one from the early 1990s...about as big if not bigger than the one today...at least so far), and,

B. Just because lumber is up some high amount it doesn't mean CPI (or prices overall) are up nearly that amount. In fact, for the spikes in 1969, 1983-84, 1991-late 1993, 1999 (for plywood in particular more than lumber in general in this case), 2003-04, and mid-2016 to mid-2018 CPI was only up single digits on an annual basis every time despite lumber price spikes in the mid to high double digits or even (as per the Random Lengths lumber index....not the various lumber producer price indexes from the Fed....although even those indices showed a pretty big spike) going up enough to nearly triple; the Random Lengths Composite did indeed almost triple during the 1991-1993 spike. Heck, if you look at the Fed data for lumber prices from Sept 1979 to late 1991 it was roughly flat over the whole time frame despite prices overall (as per the CPI) going up almost 85% during this same period.

Bottom line: One item increasing sharply in price over one given period (and that historically has then--as supply catches up with demand--made up for the spike by either decreasing sharply over the next year to three after said spike, gradually drifting slowly downwards for the next 3-6 years after the spike, and/or remaining flat for the next 7-15 years after the spike) does not double-digit inflation of the CPI make. Unless one is a termite, the huge majority of their consumption basket is not lumber or wood.
Last edited by D1984 on Fri Apr 16, 2021 3:00 am, edited 1 time in total.
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Re: Need a realtor to sell a home in this market?

Post by boglerdude » Thu Apr 15, 2021 11:52 pm

Fun n'games till the commies say you cant evict anyone
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Re: Need a realtor to sell a home in this market?

Post by Maddy » Fri Apr 16, 2021 6:48 am

Google "opportunity zones." Investors are buying exactly where they are directed by the central planners, who are giving them massive tax breaks to play by the rules.

As for real estate brokers, I have no use for them. My recent experience in two successive transactions convinced me that when hiring an "agent," you've just complicated the deal by bringing in a third party who will be pursuing his or her own interests and who at times may be acting in a manner directly opposed to the interests of his or her supposed principal. Who needs that?

Example: Realtor agrees to represent seller for a 6% commission. Within 24 hours, Realtor brings in a potential buyer, announcing (pursuant to the listing agreement) that he is now a "dual agent." All of a sudden, Seller has no one is looking out for his interests--although that was Seller's principal motivation for having an agent in the first place. Realtor presents an offer on behalf of Buyer that is clearly antagonistic to the best interests of Seller and that contains an unfavorable "feasibility contingency" clause (essentially a free option--an unconditioned "escape hatch" that ties up the property) that obviously was the brainstorm of Realtor. Seller is on his own for purposes of evaluating this offer and encounters multiple failed attempts to elicit Realtor's cooperation (or enthusiasm) in negotiating something more favorable. From Seller's perspective, Realtor is now working for Buyer, and Seller is now negotiating against not one, but two, different adversaries--one of whom knows all of his "secrets." Within the next 24 hours, a second buyer appears on the scene--a situation that gives rise to the possibility of a bidding war. Realtor withholds that information from Seller, only later admitting that to entertain a second offer while the first one was pending would have put him in a position of "conflict" vis-a-vis the first buyer.
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Re: Need a realtor to sell a home in this market?

Post by sophie » Fri Apr 16, 2021 9:15 am

Yup, you got it Maddy. I love that the apartment purchase we're heading into now involves no one else except our attorneys (sort of optional) and the seller's daughter, who is an attorney. It'll be refreshing compared to the usual web of brokers and bank mortgage agents.
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Re: Need a realtor to sell a home in this market?

Post by glennds » Fri Apr 16, 2021 9:58 am

Maddy wrote:
Fri Apr 16, 2021 6:48 am


Example: Realtor agrees to represent seller for a 6% commission. Within 24 hours, Realtor brings in a potential buyer, announcing (pursuant to the listing agreement) that he is now a "dual agent."
In most states (mine at least), dual agency requires a whole separate sign off and acceptance by the represented client. It's not baked into the mls standard listing agreement, it is a separate form. Your warnings about the risks and conflicts inherent in dual agency are absolutely valid, and very good advice. But the realtor cannot simply announce it, you have to agree to it and for all the reasons you point out, clients should politely refuse.

If it's my listing, one thing I like to do if presented with a dual agency announcement is propose taking the listing away from the realtor so they can represent the proposed buyer with no conflicts. Do it enthusiastically and magnanimously, as in "hey, I have a great idea"... my new realtor and I will look forward to your offer. The look on the would-be dual agent's face is usually priceless.

This said, for many people the guidance of a good realtor is an important protection. It's not really fair to imply that they are all worthless or unnecessary. There are many aspects of real estate transactions that require some technical knowledge and DIY may not be suitable for all. If no realtor, at least having an attorney look over one's shoulder is a good idea.
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Maddy
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Re: Need a realtor to sell a home in this market?

Post by Maddy » Fri Apr 16, 2021 3:44 pm

glennds wrote:
Fri Apr 16, 2021 9:58 am
If it's my listing, one thing I like to do if presented with a dual agency announcement is propose taking the listing away from the realtor so they can represent the proposed buyer with no conflicts. Do it enthusiastically and magnanimously, as in "hey, I have a great idea"... my new realtor and I will look forward to your offer. The look on the would-be dual agent's face is usually priceless.
That's a very good idea.

If I were to do it again, I'd make known from the outset that I'm bargaining for an agent--not a salesperson--and that if a potential buyer calls the realtor directly, the buyer should politely be referred to another brokerage.

Unfortunately, too many realtors have come to view the dual agency situation as ideal, and to regard the consequent conflict as normative. In some states, brokers' associations have actually lobbied their legislatures to dispense with the term "agent" and to replace it with the term "broker." Since the term "agent" implies fiduciary duties, this is usually a prelude to a related legislative effort to dispense with fiduciary duties entirely. So as far as I'm concerned, they've earned their reputation and no longer deserve to be regarded as professionals. They're salespersons, and their business is an "industry."
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